He said the only alternative to the bank's nationalisation was to let it collapse, trig gering financial meltdown which had to be avoided.

The PM hit back as Whitehall's spending watchdog slammed the move to public ownership after discovering the bank lent £800million in risky mortgages of up to 125 per cent in the six months after the bail out.

The National Audit Office claimed the Government failed to do proper checks before going ahead with its rescue of Northern Rock.

But Mr Brown said: "When we found out was was wrong, we took the necessary action. The NAO agrees nationalisation was the best way to safeguard taxpayers."

And he stressed the bank had already repaid £16billion to the Government. But the Tories and Lib Dems branded the 125 per cent home loans "inexcusable" and a "disgrace".

Shadow Treasury Secretary Philip Hammond said: "It is really astonishing to discover that the Treasury did not clamp down on those loans immediately.